On Instagram, a thriving bazaar taps a big market

Instagram

Instagram, the picture-sharing application that Facebook bought earlier this year, has not yet figured out a way to make money. But some of its users have.

These entrepreneurs have realized that they can piggyback on the popularity of Instagram, which has more than 100 million users, and create their own businesses, some of which have turned out to be quite profitable. They join a long line of innovators who have found creative ways to build new services on top of existing sites and platforms.

Services like Printstagram, for example, let people turn their Instagram images into prints, wall calendars and stickers. A group of designers are building a digital picture frame for Instagram photos. Some early users of the service are leveraging their expertise and sizable followings and starting consulting agencies, advising big-name brands on how best to use Instagram themselves.

And others have simply realized that the app is a great place to post photos of things they are trying to sell. Jenn Nguyen, 26, who lives in Irvine, Calif., has 8,300 followers on Instagram, where she posts images of lavishly made-up women who are wearing her brand of false eyelashes.

“When we post a new picture of someone wearing our lashes, we instantly see sales,” she said.

Nguyen is part of a wave of entrepreneurial Instagrammers who have transformed their feeds into virtual shop windows, full of handmade jewelry, retro eyewear, high-end sneakers, cute baking accessories, vintage clothing and custom artwork.

Those who want to sell things on Instagram have to resort to surprisingly low-tech tactics. Instagram does not allow users to add links to their photo posts, so merchants have to list a phone number for placing orders, or hope their followers will type the web address of their store into a browser.

Shoppers seem willing to put up with that hassle. Nguyen said that during a recent holiday sale, she offered Instagram followers a coupon for 35 percent off their orders. That day, she said, she netted 100 orders, about $4,000 in sales, up from her usual $500. In her photo captions she mentions her online store and highlights products that are new or soon to be sold out.

Most of the people taking this sales approach are small-scale entrepreneurs and artists, looking for another way to find customers for their consignment shops and jewelry businesses. Hundreds of larger companies and big-name brands have accounts on Instagram, but only a few have taken steps toward actually selling there. Bergdorf Goodman, the luxury retailer, has posted photographs of women’s shoes and jewelry alongside telephone numbers for the store.

Instagram is a compelling medium “because a photo translates to any language,” said Liz Eswein, one of the founders of the Mobile Media Lab, a digital agency focused entirely on helping companies figure out their Instagram strategies. “It’s easier to get lost in the shuffle on other networks” like Facebook and Twitter, she added.

Eswein, Brian DiFeo and Anthony Danielle formed the company in March after realizing that their collective Instagram followers – nearly 850,000 – and understanding of the service could be valuable to companies like Nike, Delta, Samsung and Marc Jacobs who were hoping to reach fans of their brands. Now Mobile Media Lab runs promotions and special campaigns for those clients and others.

“We aren’t saying ‘Click here and buy this product’ – it’s more about putting the image in their head and introducing them to a product within the service,” said Eswein. In that way, it’s closer to traditional advertising, DiFeo said: “It’s classic marketing. You see an ad on a billboard, or on a bus as it goes by, on TV and now, in an Instagram post. It sticks.”

The mini-industries cropping up on and around Instagram are fueled by the service’s explosive growth. In April, Instagram had 25 million users. Eight months later it has quadrupled that figure and amassed more than 5 billion photos. In October, the mobile service had 7.8 million daily active visitors, according to comScore, more than Twitter’s 6.6 million.

Both Facebook and Instagram declined to talk about how Instagram might make money directly. But analysts suspect that Facebook will try to weave advertising into the Instagram app at some point, much as it has with its own app.

“We’re seeing a huge uptick in images in content marketing across the board,” said Rebecca Lieb, an analyst at Altimeter Group, a firm that advises companies on how best to use technology. “Marketers are moving away from written content and toward images and videos.”

It isn’t hard to imagine a case where some images on Instagram are paid for by companies and highlighted to ensure that users see them, Lieb said. “We’re already seeing that on Facebook and Twitter.”

Since its early days, Instagram has invited developers and entrepreneurs to tap its technology and build their own applications on its shoulders, like ways to view galleries of Instagram pictures on the web instead of a phone. And it has not tried to charge for this privilege.

Kartik Hosanagar, an associate professor at the Wharton School of the University of Pennsylvania who studies online commerce, said there was a new breed of “social research and development” emerging, one that lent itself to a tremendous – but risky – opportunity for opportunistic and creative entrepreneurs.

“The small guys take the risk, and if they find something that sticks, the larger company can seize on it and take a cut,” he said. “It’s hard to predict in advance, but that’s the beauty and opportunity of a platform and why we see so many businesses built on other platforms.”

But other Internet companies have turned on their heels and cut off the add-on services that helped expand their appeal to users. The most recent example is Twitter. At first the company welcomed outside innovators who built tools for searching messages and posting photos, among other things. Then it felt pressure from investors to make money and started to shut off access.

Kevin Systrom, one of Instagram’s founders and its chief executive, has said that he will consider e-commerce as a possible source of revenue for the service, although the company has not taken any steps toward that so far. In an email, Systrom said Instagram had no plans to curb Instagram-dependent services anytime soon, as long as they did not violate Instagram’s policies.

Benjamin Lotan, 27, who runs a company called Social Print Studio in Berkeley, Calif., which sells Printstagram products, along with other things, said he wasn’t taking any chances with his business, particularly since Facebook is feeling pressure to become a more lucrative company over all.

Lotan, who started his business in early 2011, said it now generated around $1.5 million in revenue annually. Although he said he was not too concerned about the viability of the company at the moment, he was planning to begin releasing products that were not wholly dependent on access to Instagram.